Correlation Between IShares Canadian and First Trust
Can any of the company-specific risk be diversified away by investing in both IShares Canadian and First Trust at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares Canadian and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Canadian HYBrid and First Trust Senior, you can compare the effects of market volatilities on IShares Canadian and First Trust and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares Canadian with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and First Trust.
Diversification Opportunities for IShares Canadian and First Trust
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and First is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and First Trust Senior in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Senior and IShares Canadian is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares Canadian HYBrid are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Senior has no effect on the direction of IShares Canadian i.e., IShares Canadian and First Trust go up and down completely randomly.
Pair Corralation between IShares Canadian and First Trust
Assuming the 90 days trading horizon IShares Canadian is expected to generate 25.24 times less return on investment than First Trust. But when comparing it to its historical volatility, iShares Canadian HYBrid is 3.88 times less risky than First Trust. It trades about 0.01 of its potential returns per unit of risk. First Trust Senior is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,687 in First Trust Senior on August 25, 2024 and sell it today you would earn a total of 22.00 from holding First Trust Senior or generate 1.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
iShares Canadian HYBrid vs. First Trust Senior
Performance |
| Timeline |
| iShares Canadian HYBrid |
| First Trust Senior |
IShares Canadian and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Canadian and First Trust
The main advantage of trading using opposite IShares Canadian and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Canadian position performs unexpectedly, First Trust can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Trust will offset losses from the drop in First Trust's long position.| IShares Canadian vs. iShares IG Corporate | IShares Canadian vs. iShares High Yield | IShares Canadian vs. iShares Floating Rate | IShares Canadian vs. iShares JP Morgan |
| First Trust vs. First Trust Global | First Trust vs. FT AlphaDEX Industrials | First Trust vs. First Trust Value | First Trust vs. Global X Active |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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